Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following transactions occurred over the months of September to December at Nicoles Getaway Spa (NGS). September Sold spa merchandise to Ashley Welch Beauty for

The following transactions occurred over the months of September to December at Nicoles Getaway Spa (NGS).

September Sold spa merchandise to Ashley Welch Beauty for $1,700 on account; the cost of these goods to NGS was $860.

October Sold merchandise to Kelly Fast Nail Gallery for $410 on account; the cost of these goods to NGS was $180.

November Sold merchandise to Raea Gooding Wellness for $260 on account; the cost of these goods to NGS was $170.

December Received $1,140 from Ashley Welch Beauty for payment on its account.

Required:

1. Prepare journal entries for each of the transactions. Assume a perpetual inventory system.

2. Estimate the Allowance for Doubtful Accounts required at December 31, assuming the only receivables outstanding at December 31 arise from the transactions listed above. NGS uses the aging of accounts receivable method with the following uncollectible rates: one month, 2%; two months, 5%; three months, 20%; more than three months, 35%.

3. The Allowance for Doubtful Accounts balance was $45 (credit) before the end-of-period adjusting entry is made. Prepare the journal entry to account for the Bad Debt Expense.

4. Assume the end of the previous year showed net accounts receivable of $780, and net sales for the current year are $8,800.

5. Calculate the accounts receivable turnover ratio. Audreys Mineral Spa has an accounts receivable turnover ratio of 8.0 times. How does NGS compare to this competitor?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting For Managers Interpreting Accounting Information For Decision Making

Authors: Paul M. Collier, Sandy M. Kizan, Eckhard Schumann

1st Canadian Edition

1118037960, 9781118037966

Students also viewed these Accounting questions